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Keldura Daily · Markets & Economy

Why Markets Are Splitting as Inflation Risk Returns

Wall Street’s AI-driven advance is colliding with elevated oil prices and bond yields, producing record US indexes but weaker Asian markets.[1][2] In India, those inflation and capital-flow pressures have helped trigger the RBI’s first repo-rate increase since February 2023.[5][6]

The field note

6 sources · 6 items
  1. The S&P 500 has gained 14% in 2026 and the Nasdaq Composite 18.78%, despite elevated oil prices and a sell-off…
  2. Asian technology shares weakened even as Wall Street’s technology-led indexes set records, showing that enthusi…
  3. Analysts expect strong third-quarter earnings, with Bloomberg Intelligence projecting roughly 25% year-over-yea…
Story 014 sources

Can AI earnings keep outrunning oil and bond yields?

The S&P 500 gained 0.58% and the Nasdaq Composite rose 0.45% on Tuesday, taking both indexes to record closing highs as investors favored technology stocks.[2][4] By Wednesday, MSCI’s Asia Pacific gauge had fallen 0.6%, Brent crude was near $101.50 a barrel and the US 10-year Treasury yield had climbed to 5.31%.[1]

Why it matters

US equity strength is increasingly tied to a concentrated group of cash-rich AI and mega-cap companies, making the approaching earnings season a test of whether massive AI investment is producing enough profit to offset expensive energy and capital.[1][2]

Key insights

  • The S&P 500 has gained 14% in 2026 and the Nasdaq Composite 18.78%, despite elevated oil prices and a sell-off in US government debt.[2]
  • Asian technology shares weakened even as Wall Street’s technology-led indexes set records, showing that enthusiasm for the AI buildout is not lifting all related markets equally.[1]
  • Analysts expect strong third-quarter earnings, with Bloomberg Intelligence projecting roughly 25% year-over-year S&P 500 profit growth and LSEG estimating 30.6% aggregate growth.[1][4]
  • Markets were pricing about an 80% probability that the Federal Reserve would leave rates unchanged at its next meeting, while investors awaited its September meeting minutes.[3]
Story 022 sources

Why did India restart rate hikes despite stronger growth?

The Reserve Bank of India raised the repo rate by 25 basis points to 5.50%, its first increase since February 2023, and changed its stance from neutral to calibrated tightening.[5][6] It simultaneously lifted its FY27 growth projection from 6.7% to 7.1% and its inflation forecast from 5% to 5.2%.[6]

Why it matters

The increase can raise payments on benchmark-linked home, personal and vehicle loans, while potentially supporting deposit rates.[6] It also shows how an energy-importing economy can tighten policy even during strong growth when oil, food prices, currency weakness and global yields threaten inflation and capital flows.[5][6]

Key insights

  • Retail inflation reached 4.82% in August, exceeding the RBI’s 4% medium-term target for a third month while remaining inside its 2%-6% tolerance band.[6]
  • Crude above $100 a barrel raises imported-inflation and external-balance risks for India, which imports most of its energy.[5][6]
  • The India-US 10-year yield gap narrowed to 189 basis points, potentially making US assets more attractive and adding pressure on the rupee.[5]
  • About $133 billion attracted through a foreign-currency deposit initiative added banking-system liquidity; the RBI has already drained more than ₹1 lakh crore, or $10.4 billion, through bond sales and other measures.[5]

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